Credit Checks Never Tell the Whole Story!

Many of you who are reading this are in a very delicate position: you have bad credit. The subject of credit history is a bit sensitive to people like you and me because at one critical point in time, life hit us really hard. We lost our jobs or had to leave our jobs for various reasons, money got tighter and tighter, paying bills became more painful, and many of our creditors started watching us a bit too closely because we started paying our bills later and later. Finally, money got so tight that we had to set our priorities in order and paying our bills wasn't high on that priority list. So eventually, we stopped paying our bills.

We tried working it out with the creditors, but we were too scared of them. We wrote plenty of letters to them asking for their understanding and mercy, to which they only respond, "Pay up now or we'll trash your credit!" Well, you would like to pay them off, but you barely have enough money for gas, let alone a minimum payment of $120 per month for just one bill. And nobody wants to believe that you don't have a job, that your budget is tight, that you have to think of your family first - they want the money! So after failed attempts to work anything out, you were handed over to collections, started receiving plenty of threatening calls, plenty of letters, and your stress level went up so high that you started taking out your frustrations on your family.

Now your credit score is poor, you have too many negative points on your credit report, you have a difficult time getting credit, and to make things worst, your dark credit secrets are exposed to almost everybody in the world. Not only does your credit report is ruining your chances of getting credit, it's also ruining your life.

These days, it's like everybody wants to know your credit business. I mean everybody! Banks, auto dealerships, credit institutions, apartment complexes, cell phone companies, your power company, your cable company, and even your employer! As if it wasn't enough for financial institutions to get into your business, everybody else has too. It's as if you can't go to too many places without someone inquiring about your credit history. Now you feel ashamed, like you did something very bad and irresponsible and everybody judges you to be a horrible person.

Now, I could understand if banks and other financial institutions want to check your credit if you're requesting a loan from them. I think they have every right to so they could see if they could take a risk on you. And if they deny you credit because of your history, that's quite understandable. I mean, if you're going to give somebody a large amount of money to loan, you want to be sure that you'll get it back.

But what I don't understand is why does everybody else who has absolutely nothing to do with credit feels a need to check your credit. For instance, when my wife and I finally got our new apartment, I had to contact the power company to turn on my electricity. They wanted to do a credit check. Why?? What, if my credit is too bad, you won't give me power? So, I guess my wife, my baby, and I have to live with no lights, no heat, and no AC!

Well, thankfully it wasn't like that. I think if your credit isn't good enough, you'll just have to leave a big deposit, which you'll get back after 12 stinking months. So, whether it had something to do with my credit or not, I had to put down a $150 deposit. Man, did that screw us up. I didn't even start my new job yet, money was still tight, and to make it tighter, they wanted a big amount down. Goodness, it's not as if they're giving me a loan or anything. They're just giving me electricity. If I miss a payment, then do what they did in the good old days: cut the power off until I pay my bill.

When setting up my phone in my new apartment, I decided to get the triple choice plan with the cable company that included the phone, cable, and high-speed internet. I was asked if it was okay for them to check my credit. Once again, I ask myself "Why?" I was told that if I said no, then I would be required to put down a deposit. Goodness, what kind of a business you folks are running? What does credit has to do with getting your service? If I can't pay the bill, then do what they did in the good old days: cut the service off until I pay the bill and then charge me extra for turning back on the service.

Then it comes to getting an apartment. Yes, they check your credit. My wife and I were bummed that we might not get an apartment because of our credit situation. Man, would a place deny us a place to live because we have some blemishes on our credit? It broke my wife's heart thinking that we could be denied because of credit.

Well, thankfully, we did get an apartment. I suppose the management of apartments understand that they can't be too mean. The worst they could do if you don't have good credit is to take all of your money when you try to apply for an apartment. Let me tell you, applying for an apartment is expensive enough: you have to pay an application fee, an administrative fee, and a deposit that could be, depending on your credit, as much as first month's rent. You could be giving out over $1,000 just to see if you could get an apartment. Thankfully, I was a government employee and didn't have to pay so much money.

Worst of all, your potential employers may check your credit, especially if you'll be working for the government (city, county, state, or federal). Not all employers would care about your credit, but many do check for "credit worthiness." If you ever filed for bankruptcy, then you may be seen as the worst of sinners. What's bad is that when your potential employer checks your credit and see how bad it is, they won't ask for any explanations. They'll just tell you that they can't accept your application. Well, maybe there may be some out there who would be willing to give you a chance to explain yourself. And you do have a right to ask for an explanation if you're denied a position because of credit - or because of any reason. But would it actually do any good?

Don't you feel down? Feel like everybody's judging you based solely on your credit? Feel like nobody understands that life happens to all of us and it hits some harder than others? Don't worry, you're definitely not alone, because many Americans go through the same thing with credit issues. And remember, there is always someone out there with a worst credit situation than you. Well, it may not make you feel better that someone else out there is more screwed up than you are - but at least you know that you're not alone.

How Do Credit Reports Work?

What does a credit report look like? What does it really say about you? Does it really tell the whole story?

There are three major credit report institutions: TransUnion, EquiFax, and Experian. Your creditors would report to one, two, or all three of these institutions to let them know that you have an account open with the creditors, what you owe, if you pay on time, if you've been late, if you've been delinquent, if you've been placed in collections, if your account has been charged off, and if there are any legal actions brought against you. Your creditors do not have to report to these agencies, but plenty do.

On these reports, there is your address, current employer, and any public records such as judgments, repossessions, foreclosures, etc. Also on these reports is a list of all the debt you owe, all the creditors you owe, and who checked your credit. So, no one could secretly look into your credit without you knowing it.

Then we have the famous credit score. This score is kind of like a grade for your credit worthiness and it ranges from 330 to 800. What lowers your score is your delinquency, how many accounts were placed in collections, all that bad stuff. Even if you have more accounts in good standing than you have delinquent accounts, your score could still be negatively affected because of any unsettled delinquent accounts.

Now, I couldn't tell you what each person or institution that looks into your credit report is specifically looking for. For instance, you may have credit card accounts in bad standing, but you're in good standing with any loans you took out. You may have 25 good accounts and 7 bad ones. You may have plenty of bad accounts but perhaps you have a credit-counseling agency helping you, which shows that you're trying to do something to resolve your issues.

Many banks don't feel comfortable giving you money if you have credit issues. Some banks may not feel completely comfortable giving you money, but would still take a risk on you, so they would hike up interest rates. Then you have some banks that exist for people like us, willing to make a business by taking risks. If it's a bank that is willing to give you a credit card, then what they'll do is give you a small amount first, like $300, and see how good you are in paying your bill on time and not going over your limit. Other banks that are willing to take the risk would give you a small amount, hike up interest rates, and throw all these fees at you as well as increase your minimum payments.

For banks willing to give you, say, a car loan, they would increase the interest rates and the monthly payments. So, if you have nasty credit, it's not as if you could never get credit, but that banks that are willing to take a risk on you would be much stricter on you than they would on other folks. Even if you file for bankruptcy, you could still find a bank willing to give you a second chance. The one thing you must definitely have for any bank to consider giving you money is if you have a job or some reliable source of income.

Credit Reports Report Only the Facts - Not your Character

Now, what's the excuse for employers checking your credit? Well, they want to see how responsible you are, which I could completely understand - if your credit report told the whole story. Your credit report only reports facts, not your character. It doesn't record why you were late or couldn't pay the bill, and it doesn't record if you made any attempts to work things out with your creditors. All it records is that you were late on your bills. When employers look at this and make a judgment, they are looking at part of the story, not the full one. So any employer who decides to deny you a position because they only got one side of the story, forget them and move on to someone who is more concerned with whether or not you could do the job rather than how well you could pay your bills.

Employers who would seem quick to deny anybody a position based on credit are obviously the ones who never had an issue with credit. These do not understand that one of the main reasons you're looking for a job is because you can't pay the bills with. But the employers would think, "Oh man, look at his credit! It's tore up! We can't give this guy a job." But you need a job so you could fix your credit problems. How backwards is this? So instead of helping you with your financial situation, the employers just made it worst by denying you a job. What's even bad is if the job that you've been denied has nothing to do with money.

Your credit report cannot tell an employer how responsible you are. It doesn't tell a person your life situation. It doesn't guarantee anybody that you would pay your bills on time or that you won't. People inquiring of your credit have to put themselves in your position: lose a job, barely have any money coming in, have a family to take care of, need to prioritize your spending, getting highly stressed out, and getting more stressed when it becomes difficult to find a job. Of course you can't pay your bills, of course your credit will look bad. Anyone who can't understand this isn't worth working for or doing any sort of business with. Move on to someone who would understand.

Just like a grade on a test only shows part of the story (it shows that you at least have a good memory), your credit score only shows part of the story too - it shows that you didn't pay your bills. It doesn't show you why. So if you were an honest person who just couldn't pay the bills, don't let a bad score make you depressed. Don't feel ashamed when others look down on you because of your credit history. You know who you are and those who think less of you are obviously not compassionate.